Support for households, businesses and public sector organisations facing rising energy bills has been unveiled.
The scheme launched by the UK government today (21 September 2022) will provide energy bill relief for non-domestic customers in Great Britain. Discounts will be applied to energy usage initially between 1 October 2022 and 31 March 2023.
Responding to the Government's plans to cut energy bills for businesses, Richard Lambert, NHBF chief executive, said: "The energy support announced today is a lifeline for many businesses in the hair & beauty sector that have battled through the last two years. The Government has listened, and we will be providing further evidence to make the case for hair & beauty as a 'vulnerable industry' needing support after the initial six-month period has ended."
Your feedback is crucial in helping us make the case for further support and it's vital to get the latest information from you about how business is going. We're asking you to Complete the NHBF State of the Industry survey.
The deadline for responses is Friday, 30 September, at 5pm.A similar scheme will be established in Northern Ireland, providing a comparable level of support.
Eligibility
The scheme will be available to everyone on a non-domestic contract, including:
who are:
The Government expect suppliers to contact non-domestic customers over the coming weeks to advise them of the implications of the scheme.
You do not need to do anything to obtain a discount on the basis of the scheme, but you may wish to contact your supplier to ensure you are getting the most benefit from it.
You should see the impact in your energy bills for October, which are usually received in November
The discount will be given automatically. If you get a message asking for your bank details, this could be a scam. You can report messages you think are suspicious
What’s in this Update:
The amount your bills will be reduced
The Government will provide a discount on your gas and electricity unit prices. To calculate your discount, the estimated wholesale portion of the unit price you would be paying this winter will be compared to a baseline Government supported price' which is lower than currently expected wholesale prices this winter.
For all non-domestic energy users in Great Britain, this Government supported price has been set at:
A comparable rate will be set shortly for Northern Ireland.
For comparison, wholesale costs in England, Scotland and Wales for this winter are currently expected to be around:
The designs of the GB scheme and the separate Northern Ireland scheme will be consistent and will offer an equivalent level of support, but the impact on users will vary in Northern Ireland in particular since there are only limited numbers of fixed-price contracts in the market.
To ensure consistency between the domestic and non-domestic schemes, the Government supported price is based on the implied wholesale element of the Energy Price Guarantee for domestic customers. It will not be the same as the final per unit price paid by non-domestic customers, which will also reflect other costs, such as network charges and operating costs, plus the impact of competition between suppliers.
How it works
Applying the reduction
Suppliers will apply reductions to the bills of all eligible non-domestic customers.
The Government will compensate suppliers for the reduction in wholesale gas and electricity unit prices that they are passing onto non-domestic customers.
The discount applied will be in pence per kilowatt hour (p/kWh). The p/kWh government support for comparable contracts will be the same across suppliers, but the absolute level of individual bills will continue to vary across different contracts and tariffs.
For fixed contracts, the discount will reflect the difference between the government-supported price and the relevant wholesale price for the day the contract was agreed upon. The Government will publish the wholesale prices and will use for calculating this for each day from 1 April 2022.
For variable, deemed, and all other contracts, the discount will reflect the difference between the Government supported price and relevant wholesale price but be subject to a 'maximum discount' that will be determined at the beginning of the scheme.
Businesses on variable / flexible contracts will need to choose if they move to fixed contracts. This is likely to suit you if you don't want to be exposed to price variation. You will be contacted by your supplier.
The p/kWh government support for comparable contracts will be the same across suppliers, but the absolute level of individual bills will continue to vary.
Third party intermediaries (TPIs) / energy brokers have no influence over the per unit cost reductions that will be applied to energy costs under the scheme. You do not have to take out a new contract or change your contract for appropriate reductions to apply to your bills automatically.
Examples
The level of support for each organisation will vary depending on type and date of the contract.
These are illustrative examples based on recent averages of forward wholesale prices and may differ from those experienced in practice.
Example 1: A pub
A pub uses 4 MWh of electricity and 16 MWh of gas monthly. They signed a fixed contract in August 2022, giving them a current monthly energy bill of about £7,000. At the time they signed their contract, wholesale prices for the next six months were expected to be higher than the Government supported price of £211/MWh for electricity and £75/MWh for gas, meaning they could receive support under this scheme.
The difference between expected wholesale prices when they signed their contract and the Government supported price is worth £380/MWh for electricity and £100/MWh for gas, meaning they receive a discount of £3,100 per month, reducing their bill by over 40%.
Example 2: A medium-sized restaurant
A medium-sized restaurant uses around 3.5 MWh of electricity and 4 MWh of gas each month. They are on a variable contract, giving them a current monthly energy bill of around £3,900 per month. As they are on a variable contract, they can receive support up to the Maximum Discount (currently estimated to be £405/MWh for electricity and £115/MWh for gas). Applying the Maximum Discount rates means that their monthly energy bill reduces by around half.
Example 3: A small retail shop
A small retail shop uses around 1 MWh of electricity and 2 MWh of gas each month. They are on a variable contract, giving them a current monthly energy bill of around £1,400 per month. As they are on a variable contract, they can receive support up to the Maximum Discount (currently estimated to be £405/MWh for electricity and £115/MWh for gas). Applying the Maximum Discount rates means that their monthly energy bill reduces by around 45%, leaving them with a bill of around £800 per month.
How you will get the reduction
The support will be automatically applied to all eligible bills. You do not need to take action or apply to the scheme.
The savings for energy used in October will be seen in your October bills, which would usually be received in November.
If you have an existing fixed price contract
If you agreed to your fixed price contract/tariff on or after 1 April 2022, you will get support if the calculated wholesale element of the price you are paying is above the Government supported price.
If your fixed tariff is based on wholesale prices below the Government supported price, then you will not be eligible for support.
Your per unit energy costs will automatically be reduced by the relevant pence per Kilowatt Hour (p/kWh) for the scheme's duration.
If you're about to sign a new fixed-price contract
The relevant price reduction will be automatically applied to your bill by your supplier.
If you are on a default or variable tariff contract
If you are on a variable tariff and want to remain on it, you will get the reduction, subject to the 'maximum discount'.
The maximum discount will be calculated by comparing the Government supported price with the average expected wholesale prices for delivery across the six months of the scheme. The Government will confirm the maximum discount on 30 September, but it will likely be around £405/MWh for electricity and £115/MWh for gas, subject to wholesale market developments.
If wholesale prices rise above the combined government-supported price and maximum discount, your prices will increase.
If you're on a flexible purchase contract
Some large non-domestic energy users buy energy using flexible contracts, which enable them to decide when to hedge for portions of their demand throughout the term of the contract.
If you're on a flexible purchase contract, your price reduction will depend on the difference between your monthly weighted average baseload price (determined by your individual hedging approach) and the government-supported price. In this case, the maximum support available per unit of energy will also be limited by the maximum discount.
If you signed your fixed contract before 1 April 2022
If you signed your fixed rate contract before 1 April 2022, you would not have been exposed to the recent rises in wholesale prices, so you will not be eligible for support under the scheme.
If you are out of contract
If you are out of contract and are waiting to see the details of government support, you should set up your contract as normal. Your supplier will automatically apply appropriate reductions to your energy price for the duration of the scheme.
If you get your energy through a landlord/heat network/energy service company
The Government expect businesses and other organisations to pass on the benefits of this scheme to the end user reasonably and proportionately. This will ensure support, for instance, to customers of heat networks and park home residents.
Reviewing the scheme
The Government will publish a review into the operation of the scheme in 3 months to inform decisions on future support after March 2023. The review will focus, in particular, on identifying the most vulnerable non-domestic customers and how the Government will continue assisting them with energy costs. These are likely to be those who are least able to adjust, for example, by reducing energy usage or increasing energy efficiency.
The review will consider:
Continuing support to those deemed eligible would begin at the end of the initial 6-month support scheme, without a gap.
Support from suppliers
The Government expect suppliers to contact non-domestic customers over the coming weeks to advise them of the implications of the scheme.
You do not need to do anything to obtain a discount on the basis of the scheme, but you may wish to contact your supplier to ensure you are getting the most benefit from it. There will be a benefit, in particular, for some smaller businesses who have recently been moved off fixed tariffs to switch back to one, with the price reduced on the basis of the government scheme.
The Government is working with suppliers to ensure that all non-domestic consumers are offered tariffs on competitive terms, for example, by giving their existing customers the opportunity to move to a fixed contract.
The Government will publish technical guidance for energy suppliers on the operation of the scheme shortly.
Act Now – To secure energy support after the six-month price support scheme
The survey should take less than 10 min, and your responses are strictly confidential.
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